2017 Full Year Results. 22 November 2017

Transcription

1 2017 Full Year Results 22 November 2017

2 Agenda Highlights - Peter Fankhauser CEO Financial results Strategic progress Current trading and outlook Page 2

3 Strong demand for our holidays driving growth Revenue increased by 9% Underlying EBIT up 24 million to 330 million Strong recovery at Condor; another record year for the Nordics UK margins lower after four consecutive years of profit growth Net debt reduced by 122 million to 40 million; new bank facilities agreed Recommended dividend of 0.6 pence per share 1 HIGHLIGHTS Page 3

4 Implementing our growth strategy status report Our commitment in 2015 Renew focus on customer satisfaction Develop and grow own-brand hotels Differentiate core hotels and streamline the rest Let the airline fly New growth opportunities Simplify the business and drive efficiencies Progress to date Net Promoter Score part of performance framework Customer at our Heart cultural change Brand innovation eg. Casa Cook, and hotel pipeline developed Partnership with LMEY to accelerate growth More differentiation e.g. 24 hour promise Partnerships with Expedia and Sunhotels on Complementary Renewed and refurbished entire aircraft fleet Taken advantage of seat-only & long haul growth opportunities Launched Thomas Cook China in partnership with Fosun Founded Thomas Cook Money Harmonising processes and systems across the Group Group-wide cost reduction initiatives 1 HIGHLIGHTS Page 4

5 Agenda Highlights Financial results - Michael Healy Group CFO Strategic progress Summary Page 5

6 Financial overview Like-for-like revenue growth of 9% Gross Profit up 56 million Underlying EBIT growth of 24 million Net Debt improvement of 122 million m FY17 FY16 (i) Change Like-for-like Change Revenue 9,007 7,810 +1, Gross profit 1,995 1, Gross Margin 22.1% 23.4% -130bps -130bps Underlying EBIT EBIT margin 3.7% 3.9% -20bps Same Profit after tax Net Debt (40) (129) (i) Restated 2 FINANCIAL RESULTS Page 6

7 Group revenue bridge Significant growth to Greece, Spain and long-haul destinations million (9%) ,007 (100) 8, ,810 FY16 FX Fuel FY16 LFL Greece Spain Turkey Other Long Haul Short/Medium Haul Other FY17 2 FINANCIAL RESULTS Page 7

8 Group gross margin bridge Gross margin decline due to higher UK cost inflation and mix effects in Continental Europe 23.4% -130 basis points (0.7)% (0.5)% 0.0% (0.1)% 22.1% FY16 UK Tour operator CE Tour Operator NE Tour Operator Airline FY17 The chart above shows the proportionate impact of each business line on Group Gross Margin % 2 FINANCIAL RESULTS Page 8

9 Group EBIT bridge Benefits from New Operating Model supporting Group EBIT growth + 24 million 67 (19) (4) (20) Net New Operating benefits of 44m FY16 restated FX FY16 Gross New Operating Model benefits Inflation Depreciation Other FY17 2 FINANCIAL RESULTS Page 9

10 New Operating Model benefits Cumulative net EBIT benefit of 70m since FY15 ( 26m in FY16 & 44m in FY17) Gross targeted benefits of 210m to 240m by FY19 Offset by cost 80m- 90m FY19 net target 130m- 150m FY19 target FY17 Gross Benefits: 67m FY16 Gross Benefits: 63m (37) (23) (80) (90) Own-brand hotels & flights Differentiated Holiday offering Complementary Holiday offering Omni-channel CRM & Ancillaries Efficiencies Overhead & Depreciation Cost Inflation Net EBIT benefit 2 FINANCIAL RESULTS Page 10

11 EBIT by business Recovery in the Group Airline leads to Group EBIT growth of 24m Group Tour Operator Group Airline Total Group EBIT Margin % 3.3% 3.8% 3.5% 5.1% 2.8% 3.6% 4.1% 3.7% 3.7% - 5m + 34m + 24m FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 Corporate costs were 35m in FY17, 30m in FY16 and 30m in FY15 2 FINANCIAL RESULTS Page 11

12 Tour Operator EBIT Group Tour Operator EBIT slightly below last year Tour Operator Businesses UK Continental Europe Northern Europe Group Tour Operator - 34m + 25m + 4m - 5m FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 2 FINANCIAL RESULTS Page 12

13 Group Airline EBIT Group Airline EBIT growth of 34 million due to Condor recovery and strength in our Belgian airline Condor profit improvement measures... delivered 24m of benefits during FY17 Rerouted capacity 10m More flexible planning Fuel hedging benefit 5m 10m Cost reduction initiatives 14m Operating cost increases (15)m On track to exceed fully annualised EBIT benefit of 35m in FY18 1 Q1 17 YoY Q2 17 YoY Q3 17 YoY Q4 17 YoY 1. Versus FY16 baseline 2 FINANCIAL RESULTS Page 13

14 Net debt Net Debt of 40 million represents a reduction of 122 million on a like-for-like basis Like-for-like improvement (80) of 122 million 105 (61) 552 (199) (105) (129) Free Cash Flow improvement + 93m year-on-year (32) (8) (40) (129) (33) (162) 30 Sept 2016 Financing, FX & other non-cash items 30 Sept 2016 LFL EBITDA Working Capital Tax and Pensions Capex Exceptionals Net interest paid Co-op payment Dividend 30 Sept FINANCIAL RESULTS Page 14

15 New financing arrangements Signed 975 million of new financing arrangements High levels of interest from existing syndicate banks; attracted new lenders Replaces previous 800 million facility maturing in May 2019 New RCF and bonding facility runs until November 2022 Helps to make our capital structure more efficient, with more liquidity and greater flexibility to invest in growth 2 FINANCIAL RESULTS Page 15

16 Progress against financial targets Revenue growth Target At least in line with market (i) Comment on status Achieved 9% revenue growth in FY17 EBIT benefits from New Operating Model Existing: 130m to 150m by FY19 New: 160m to 180m by FY20 In line with plan - 70m achieved since FY15 Cash conversion >70% per annum Achieved cash conversion of 82% in FY17 Fixed term debt reduction 300m equivalent to 23m interest cost reduction (ii) Interest cost reduction of 18m through liability management (i) European leisure travel market, expected to grow at 2% - 3% per annum (ii) Calculated as 300m of fixed-term debt at an interest cost of 7.75% 2 FINANCIAL RESULTS Page 16

17 Agenda Highlights Financial results Strategic progress - Peter Fankhauser CEO Current trading and outlook Page 17

18 Our strategy for profitable growth a recap 3 STRATEGIC PROGRESS Page 18

19 Care: Putting our customers first Group NPS development (i) NPS linked to loyalty +9 points since FY15 +5 Points FY16 +4 Points FY17 NPS FY16 (i) Overall Group NPS improved from 36 in FY15, 41 in FY16 and 45 in FY17 (ii) Rate of customers rebooking to visit same hotel within 18 months after rating their holiday. Analysis based on branded hotels with > 3,000 Thomas Cook guests 3 STRATEGIC PROGRESS Page 19

20 Contact: Growing digital distribution FY17 web bookings (i) Online share of Group bookings Channel development (i) +27% 43% 46% 46% Online own websites +3% across Group Mainly UK and Germany +22% 40% 22% Offline own stores -5% across Group +18% 32% Third party retail +2% across Group FY15 FY16 FY17 FY17 (i) Versus FY16 3 STRATEGIC PROGRESS Page 20

21 Holidays: Focusing our differentiated holiday offering Focus on differentiated hotels Concentrating growth into a more focused portfolio of core hotels More influence and control over quality standards, and higher margins c.10,000 Pre ,630 Sales up 5% 150 hotels 3,480 Sales up 12% (i) 310 hotels (i) On a booked basis so far 3,170 Summer 16 Summer 17 Summer 18 Differentiated hotels include our own-brand hotels and selected partner hotels 3 STRATEGIC PROGRESS Page 21

22 Holidays: Own-brand hotels Portfolio of 190 own-brand hotels at the heart of our holiday offering - Own-brand NPS 6 points higher than portfolio average - Higher rebooking rate and margin than other hotels Added 11 new hotels for Summer 17 Acquisition of 42% stake in Aldiana brings a further 8 club resorts into the portfolio Another 20 hotel openings at least by Winter18/19 3 STRATEGIC PROGRESS Page 22

23 Holidays: Plans for a hotel investment platform Hotel Investment Platform Operator of franchised/managed hotels Access to 20 million customers Experienced hotel investor and developer 20 hotels & resorts across 11 countries Platform with around 150m of seed assets Five hotel seed assets across Spain, Greece and Austria Focus on sun & beach hotels, and club resorts Expansion to be funded through 3 rd party debt / equity Advantages for Thomas Cook: Accelerates own-brand hotel portfolio Asset-light exposure to growth Grow hotel management contracts 3 STRATEGIC PROGRESS Page 23

24 Holidays: Developing our airline business Customer proposition Fully modernised fleet New in-flight entertainment system Opening new routes Profitably grown long-haul - customers up 12% Added 15 new destinations including San Francisco, New Orleans and San Diego Leveraging tour operator 40% of passengers from Thomas Cook tour operator Growing sales to third-party tour operators Operational Efficiency & Safety Improved reliability and operational performance Significant reduction in 3- hour delays New partnerships to extract further efficiencies 3 STRATEGIC PROGRESS Page 24

25 Holidays: Airline growth in FY17 Strong demand in wake of Monarch and Air Berlin, especially from 3rd party tour operators Seat only & 3rd party tour operator customers (m) Long haul Customers (m) +11% 9.2m +12% 8.2m 3.0m 3.4m FY16 FY17 FY16 FY17 3 STRATEGIC PROGRESS Page 25

26 Holidays: Strategic developments in our airline Balearics Transferred operations of Thomas Cook Airlines Belgium into Brussels Airlines Gives our customers wider choice of flights Enables us to manage airline operations more effectively Seven-year agreement with Canadian tour operator Air Transat to exchange aircraft on a seasonal basis Enables us to utilise our fleet more efficiently New base in Majorca will provide aircraft with more flexibility at a cheaper cost Maintain closer control over quality and customer experience Applied for new AOC with aim for first flights in early STRATEGIC PROGRESS Page 26

27 Services: New ancillary innovations for Summer 2018 Choose your room Guaranteed room on early arrival 3 STRATEGIC PROGRESS Page 27

28 Services: Thomas Cook Money New financial services division focused on holiday money & insurance Combines heritage & trust in TC brand with world-class innovation Mobile-first approach to help holidaymakers plan, save, borrow & spend App-based prepaid travel card Supports 10 major currencies Accepted worldwide Pay-as-you-go travel insurance Tailor your needs through app Per-trip, per-day or per-person cover 3 STRATEGIC PROGRESS Page 28

29 Partnerships: Outsourcing complementary product Expedia to become preferred supplier of City & Domestic hotels Expedia s booking platform to power Thomas Cook s city break and hotel-only sales channels Thomas Cook to offer core sun & beach packages on Expedia sites globally Customer proposition Gives customers access to 65,000 hotels Richer content and better booking experience All hotels will meet our standards on quality, value and health & safety Catalyst to for further change Complementary business now outsourced Enables significant streamlining of Group 3 STRATEGIC PROGRESS Page 29

30 Partnerships: Thomas Cook China Joint venture with Fosun Launched in 2016 Offices in Shanghai and Beijing, supported by 100 staff Technology Product Developed China-specific tour operating system API connection to TCG packages and Sunhotels hotel inventory Provides differentiated holiday experiences leveraging TCG DMC network Includes own-brand hotels & sports packages Incoming agent for companies & football clubs 20,000 customers in first year Target to grow by 10x in FY18 Distribution Own website and 24/7 customer contact centre Key partnerships established: Alibaba ( Fliggy ), Spring Travel Aims to become a significant Chinese travel business, combining first class technology with high quality products and services under the Thomas Cook Brand 3 STRATEGIC PROGRESS Page 30

31 Agenda Highlights Financial results Strategic progress Current trading and outlook - Peter Fankhauser CEO Page 31

32 Current trading and outlook WINTER 2017/18 SUMMER 2018 OUTLOOK Overall Winter trading in line Group Winter bookings up 5%, pricing up 2% Good demand for Canaries and North Africa Decline in long-haul due to Hurricane Irma Tour Operator bookings up 3% Airline bookings up 6% Group Tour Operator bookings and pricing ahead Very strong demand for Turkey and Egypt UK Tour Operator bookings up 2%, pricing up 6% Good performance from Nordic and Continental Europe Tour Operators expected Actions to address UK Tour Operator underway Growth in Airline supported by Condor recovery Well-positioned to achieve market expectations Based on cumulative bookings to 11 November CURRENT TRADING AND OUTLOOK Page 32

33 Summary A year of strong underlying performance Customer focus delivering tangible benefits Improved holiday offering New partnerships to transform our future opportunity Well positioned to deliver further profitable growth 4 CURRENT TRADING AND OUTLOOK Page 33

34 Q&A Page 34

35 Financial calendar Q Trading Update 8 February 2018 H Interim Results 17 May 2018 Q Trading Update - 31 July 2018 Pre-close Trading Update 25 September 2018 FY 2018 Results 29 November 2018 APPENDIX Page 35

36 Revenue & EBIT by quarter Share of revenue Revenue bn Q1 18% Q2 15% Q3 25% Q4 42% + 14m + 63m + 287m + 358m Full Year m FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 EBIT m m + 1m + 10m + 12m m 330 (54) (50) (49) (122) (129) (128) APPENDIX Page 36

37 EBIT reporting segmentation (New vs Old) m Group Tour Operator EBIT by Geographical Market Group Airline Corporate FY17 EBIT Year-on-Year UK 111m - 33m Continental Europe 108m + 33m Northern Europe 134m + 5m Condor 12m + 24m Corporate (35)m - 5m EBIT by Business Line FY17 EBIT 250m 115m (35)m 330m Year-on-Year - 5m + 34m - 5m + 24m Note: The Belgium Airline was transferred to SN Brussels 1 November 2017 and is no longer part of the Group APPENDIX Page 37

38 Revenue & EBIT by geographical market (Old Segmentation) Revenue EBIT m FY17 FY16 (i) FY16 FY17 FY16 (i) FY16 UK & Ireland 2,476 2,363 2, Continental Europe 4,139 3,435 3, Northern Europe 1,307 1,132 1, Condor 1,470 1,253 1, (10) (12) Intercompany Elims / Corporate (385) (373) (372) (35) (30) (30) Thomas Cook Group 9,007 7,810 8, (i) Restated APPENDIX Page 38

39 Group income statement m FY17 FY16 FY15 FY17 vs. FY16 Change Revenue 9,007 8,285 8, Gross Profit 1,995 1,939 1, Overheads (1,665) (1,633) (1,608) -32 EBIT Separately Disclosed Items (EBIT) (99) (105) (99) +6 Profit/Loss from Operations Associated Undertakings (1) (1) 8 - Net investment income Separately Disclosed Items (Finance Charges) (41) (23) (28) -18 Net Finance costs (143) (140) (141) -3 Profit / (Loss) before Tax Tax (34) (33) (31) -1 Profit / (Loss) after Tax Reported Basic EPS 0.8p 0.3p (i) 1.6p +0.5p Reported Underlying EPS 9.3p 8.1p (i) 8.9p +1.2p (i) FY16 Basis & Underlying EPS were restated for non-cash adjustments as part of the normal full year audit process APPENDIX Page 39

40 Separately disclosed items P&L SDIs ( m) FY17 FY16 NUMO implementation costs (42) (50) Restructuring costs (12) (20) Onerous leases and store closures (30) (21) Costs of transformation (84) (91) Reassessment of contingent consideration 32 4 Write offs, revaluations and other non-cash (23) (15) Other (24) (3) EBIT related items (99) (105) Finance related charges (41) (23) Total (140) (128) Of which: - Cash (i) (125) (93) - Non-Cash (15) (35) Cash SDIs ( m) FY17 FY16 Current year cash related exceptionals (125) (93) Of which will be paid in future years Prior year cash exceptionals paid in current year (16) (13) Prior year EU261 (paid in FY) - (9) Total (115) (95) (i) Items classified as Cash represent both current year cash flows, and cash effects which are yet to be realised APPENDIX Page 40

41 Group cash flow Group Cash Flow m FY17 FY16 Change EBITDA Working Capital Tax (37) (15) -22 Pensions & Other (24) (25) +1 Operating Cashflow Exceptional items (105) (95) -10 Bond refinancing (10) Capital Expenditure (199) (200) +1 Net Interest Paid (129) (129) - Free Cash Flow Dividend and Co-Op payment (40) (4) -36 Net Cash Flow Cash Conversion calculation m FY15 FY16 FY17 EBIT Net interest (141) (140) (143) Underlying PBT Free cash flow Cash conversion (%) 95% 37% 82% Opening Net Debt (129) (128) -1 Net Cash Flow Other Movements in Net Debt (24) (57) +33 Closing Net Debt (iv) (40) (129) +89 APPENDIX Page 41

42 Capital expenditure (1) FY16 FY m 85 Airlines IT Hotels Store refits m 79 Other (i) Capital expenditure is net of disposal proceeds APPENDIX Page 42

43 Net finance costs Pro Forma P&L finance costs (i) m Coupon FY16 FY Interest on bank facilities - (1) Interest on m bond 7.75% (19) (3) Interest on m bond 7.75% (32) (7) Interest on m bond 6.75% (21) (24) (24) (24) (24) (18) - Interest on m bond 6.25% - (33) (42) (42) (42) (42) (32) RCF and bond interest (72) (68) (66) (66) (66) (60) (32) Commitment fees and other bank related charges (12) (10) Letters of credit & bonding (18) (20) Other interest costs (18) (24) Assumed at c. 70m Fee amortisation (7) (7) (same level as 2017) Interest income 6 4 Net interest & finance costs before aircraft financing (121) (125) Aircraft financing (19) (18) Net Finance Costs (140) (143) (136) (136) (136) (130) (102) (i) Assumes all bonds are repaid on maturity APPENDIX Page 43

44 Net debt composition m 30 Sept Sept 2016 Variance 2017 GBP Bond June (200) Euro Bond June (451) Euro Bond June 2021 (353) (345) (8) 2022 Euro Bond June 2022 (662) - (662) Commercial Paper Various (218) (117) (101) Revolving Credit Facility May Finance Leases Various (154) (183) 29 Aircraft related borrowings Various (32) (64) 32 Other external debt Various (37) (26) (11) Arrangement fees n/a (6) Total Debt (1,439) (1,363) (76) Cash 1,399 1, Net Debt (40) (129) 89 APPENDIX Page 44

45 Reconciliation of like for like to underlying numbers Underlying refers to trading results after adjusting for separately disclosed items that are significant in understanding the ongoing results. m FY17 m Revenue Gross Margin EBIT FY16 m Change m FY17 % FY16 % Change % FY17 m FY16 m Change m Underlying 9,007 7,810 +1, % 23.4% -130bps Like for like reflects the comparison in the underlying results after removing identifiable non-recurring items in the prior year. Fuel (100) % -30bps n/a n/a Currency impact (0.3)% +30bps 4 +4 Like-for-Like 9,007 8, % 23.4% -130bps APPENDIX Page 45

46 FX and fuel hedging (31 October 2017) Winter 2017/18 Price Summer 2018 Price FY18 Price Winter 2018/19 Price EUR 93% 76% 81% 39% USD 97% 83% 90% 33% Jet Fuel (i) 97% $522 90% $534 93% $529 51% $554 Overall Fuel Rate (ii) (i) Jet Fuel Price [$/Mt] incorporates achieved hedge rates per season with market forward rates applied to unhedged portion. (ii) Based on estimated Jet Fuel costs & Intoplane costs, converted at $ blended hedged rates into functional CCY equivalents and then translated into GBP, either at average rates for partially completed years or latest spot rates [ /Mt]. EUR, USD & Fuel are hedged in line with policy A 1% EUR market rate variance in 2018 would have an annualised 2.2m impact, and a 1% USD market rate variance in 2018 would have an annualised 0.9m impact A 1% Jet Fuel market rate variance in 2018 would have an annualised 0.5m impact APPENDIX It is our policy not to hedge EUR and SEK profits, but the impact of fluctuations in those currencies on Group profits can be summarised as: Every 1% move in Euro has a 1.5m impact on EBIT Every 1% SEK movement has a 0.7m impact on EBIT ((iii) Spot rates as at 15 th November 2017 Page 46